29 September 2022 Equities | FX | Portfolio Updates

Prime Trade Ideas: No Reason to Panic in Volatile Markets

By Ben Ford
5 min read

We consolidate our favourite biases into one, easy-to-read, weekly report! Please find the original pieces linked throughout and a summary table at the end of the document. Reach out to us on Slack or email the author with any questions about the content.

An Update on Our Latest Trade Ideas

We summarise the latest updates on our trade ideas here with links to the original analysis.

Our biases in Asia FX have registered strong returns. Now, we are making changes. We closed our bearish KRW position and turned bearish on SGD ahead of the bi-annual MAS policy review. We also point out 7.20 as the level to watch in USD/CNH and keep our 7.00 USD/CNH October call.
We turn neutral on iron ore with tight supply and weak demand fighting to drive the price in opposite directions, with neither winning currently.

Bilal’s Asset Allocation Update

Find Bilal’s latest asset allocation biases here.

Rarely can we point to one factor driving the performance of all markets. But since the global financial crisis in 2008, that factor is low interest rates. Now, the tide is changing; interest rates could reach at least 5%! In our view, all of this points to further downside across asset markets.
We continue to be overweight cash. This is a defensive posture but also gives us liquidity and the ability to mop up assets when they reach distressed levels. It also prevented us from losing money in August.
We remain underweight equities and bonds given our view on the above.
A lack of supply is battling with weaker growth prospects; we remain neutral commodities.
We also remain neutral crypto.

John Tierney’s US Equity ETF Biases

Find John’s full list of ETF biases here. Alternatively, they are in the table below.

John leaves his US Equity ETF biases unchanged this week.
In the last update, he reiterated his call to be overweight energy and marketweight semiconductors. He also closed two ETF positions (AWAY – reopening; OIH – energy).

Henry’s European ETF Biases

Henry made this call back in March. The premise still holds, and we review short-term adjustments periodically.

Long-term overweight renewable energy (FAN, INRG): The EU remains hugely exposed to Russian energy – not just in gas but nearly all fossil fuels. It means that simply replacing the supply of Russian gas energy with other sources may be practically difficult (due to infrastructure) as well as geopolitically unattractive. Longer term, a concerted increase in renewables spend is highly likely.
Paring overweight financials exposure. European stocks have faced substantial volatility as of late, from Russian gas supply, ECB policy, and Italian politics. It has meant we have pared exposure to the financial sector. Long term, however, we see strategic value in overweighting financials (CB5).

Cryptocurrency Models

Find our latest bitcoin signals here and our latest ethereum signals here.

We are marginally bullish bitcoinover the next two to four weeks. The macro backdrop has worsened, but on-chain/flow metrics are picking up, providing a supportive environment.
We are neutral ethereumover the next two to four weeks with on-chain/flow signals unable to provide a basis for any sustained move higher following the merge.

Discretionary Macro

Our latest discretionary macro biases in collaboration with SGX can be found here (FX) and here (Commodities and China Growth Tracker) while our latest views on rates in collaboration with TMX can be found here.

In our latest SGX Asia Currencies Insights update, we pointed out 7.20 as the level to watch for USD/CNH, closed our bearish KRW position at a significant profit, and became bearish on SGD ahead of the bi-annual MAS policy review. Meanwhile, we held onto our 7.00 October USD/CNH call and held onto our other biases (bearish INR and bullish THB).
In our latest SGX Commodities Insights and China Growth Tracker update, we turned neutral on iron ore, from previously short, as tight supply is balancing well with weak demand. We note, however, that at least one city plans to restart its stalled housing projects. If others follow, that could boost iron ore and steel demand.
In our latest TMX piece, we are bullish Canadian rates (two- and 10-year) and bearish US rates (two- and 10-year). This is because we think the Fed will end up hiking more than the Bank of Canada, an opposing view to the market, while Canadian housing is more vulnerable than US housing.